The Beauty Of Avoiding An Accruing Interest Rate

Most people are not interested in paying interest. See what we did there? And that’s because it’s pretty difficult to know exactly what an interest rate is going to equate to in actual dollars and cents. When you’re paying back money that you’ve borrowed from a financial institution, the interest rate associated with your loan ensures a couple of things.

#1. Additional charges will accrue on your loan over the course of time. Take the amount of money that you’ve borrowed from a bank and add to that a certain amount of interest every month. But what is that certain amount? Sure, you may know your interest rate. But it takes the brightest of mathematicians to figure out what the precise dollars and cents amount is going to be each month.

Firstly, the interest charges are obviously based on your interest rate. Secondly, they also depend on the remaining balance that you owe. Thirdly, the amount of your payments and the days the payments are posted are relevant. Each day that you are carrying a balance counts as another day to charge you interest. The quicker you make payments, the faster you’re able to reduce the amount of the loan and therefore, the amount of the interest charges.

#2. Your payments will go towards paying the interest first. Whatever the amount of interest is that you’ve accrued each month, it will be paid when you submit your payment. Anything in excess of your accrued interest will be put towards your principal balance. So just to use an example with crude hypothetical numbers, a $200 payment may only reduce your principal balance by $140.

As a result, it’s important for borrowers to pay as much towards their loans as possible each month. That way, they can lower the balance, accrue less interest and pay their loans off faster. In addition, one of the main benefits of making larger payments is that it lowers the total amount of interest that is paid in full once the loan has been completely paid off.

What’s the problem with making larger payments towards a loan? It’s not exactly all that easy to do. After all, the point of business owners taking business loans out from their banks is because they are in need of that money to invest into their businesses. During the months when business growth is being worked on, it’s not exactly feasible to put aside large sums of money to go towards loan repayment. This is what makes merchant cash advances much more viable options for small and medium-sized business owners.

How do merchant cash advances help you to avoid interest charges? The way a merchant cash advance works is a lot different than the way a loan works. Firstly, it is not borrowed money. Merchant cash advances are, in fact, purchases of a merchant’s future credit card and debit card sales. MCAs provide business owners with money that they’re eventually going to make in advance.

Secondly, there is no repayment schedule and thirdly, there is no interest rate. Here’s where the biggest difference is made obvious. Instead of an interest rate, merchants are charged one-time fees. That means that they know EXACTLY how much they will have to pay back in full. There is no guessing game. It doesn’t matter how long it takes for the advance to be paid back, there will never be an accruing interest rate making it more expensive than what was initially promised.

How are payments made? Payments are made automatically through a small percentage of a merchant’s future credit card and debit card sales. That means that payments are only made when merchants are paid first. If sales are slow, so are the payments. If sales pick up, so do the payments. At Synergy Merchants, we work directly with the fluctuating sales of all of our clients so that they’re always able to afford their payments!

We’re sure you have some questions about our merchant cash advance program. Please don’t hesitate to ask them! For more information or to speak with one of our licensed funding specialists to get a free, no obligation quote, simply call Synergy Merchants at 1-877-718-2026 or email us at info@synergymerchants.com.